The discourse related to business activities and asset classes that incorporate “triple bottom line” targets (social, environmental and profitable) continues to be pushed further into the global investment agenda.  Yet amongst all the fervour, most proponents have been increasingly keen to avoid painting a rose tinted picture taking into consideration the asset class’s infancy.  The Monitor Group report in collaboration with the Acumen Fund, for instance, pointed to the lack of understanding of risk, fragmented demand / supply and supporting infrastructure as major bottlenecks.  In a recent Next Billion post, Mark Hand and Nikhil Dandavati of First Light and Gray Ghost Ventures commented that the industry lacks “definitions, parameters or goals” as well as evidence of the often quoted promise of “combining financial return and social impact.”  This characteristic was also underlined in a late 2011 JP Morgan / GIIN Survey which pointed to the shortage of quality investments and a lack of track record as the most highly ranked responses to critical challenges. Michael Chu of the IGNIA Fund also recently stated at the Latin American Forum on Impact Investing that managers need to have a “stomach” for high risk as well as be prepared to persevere over the long term and “lose many battles in order to win the war”.

In no better way are these teething difficulties being exemplified than via the base of pyramid (BoP) housing sector’s relationship with impact investment, where it is arguably hard to find much forward thinking dialogue of any form.  Today, the segment is led by a loose mix of government led initiatives and a handful of NGO / philanthropically funded players who, whilst striving to progress efficiently, lack the capacity to confront the ever expanding global deficit of some 98,000 units per day.  Even with such shocking statistics – despite an increasingly present impact investing strategy being slowly but surely geared to issues related to communications, health, education and food provision – global affordable housing (i.e. for the billions that live in slums) is broadly considered untouchable given the myriad of complex issues related to the inherent nature of the sector in its current form.

Primarily, the capital heavy nature of housing construction under conventional methodologies makes risk aversion tough.  It is rare to hear of projects “running smoothly” under significant financial, labour and other administrative pressures.  As demonstrated in our research in Lagos, Jakarta and Bogotá – in many urban regions where BoP populations are gravely intensifying, low income housing growth is prioritised little whilst being fuelled by speculation and inefficient support mechanisms as well as wider factors such as irregular currency movements, inflation, complicated national land laws and corruption.  The sector is thus understandably mistrusted, proven by countless previous experiences where large financial sums have been allocated to financially unsuccessful projects upon conclusion.

The current “plan B” that has subsequently infiltrated the space is related to housing microfinance, broadly described as small scaled loans for structural and other decorative improvements.  Yet, as we questioned in our recent analysis of the “BIG IDEA” affordable housing report, the credentials of this being a truly legitimate impact investment opportunity are also open to significant debate in line with the impending magnitude of slum presence; the lack of sustainable models; underwriting risks and poor measurement tools / indices amongst other risks (we also explored the inefficiencies of single storey housing construction, another popular BoP strategy).

With the core ethos of global real estate being to profit solidly – which is usually only achieved via catering to the middle to high end demographic groups – there is very little to brighten the eyes of investors when looking at the BoP housing sector.  Yet, at the same time, with urban landscapes being ever-increasingly populated with the poor and affordability gaps continuing to widen, huge strains are being placed on market sustainability.  This phenomenon has been witnessed in recent years amongst a number of emerging countries such as India, China and Brazil where mid-upper income housing supply has already reached a market saturation point (demonstrated by the wide presence of half sold or empty developments, all whilst the BoP remain in insalubrious living conditions).

Of course, the market simply cannot remain stagnant until equilibrium is reached and the demand for housing that developers are more “comfortable” in working with gets going again.  Simple economic laws implicate that any other strategy that does not cater to where real needs are (or artificially does so) will be highly risky, producing shorter and more intensified boom-bust cycles.  Consequently, if developers want to stay in business, there is theoretically no other choice but to cater to the BoP market.  However, whether they take note of this glaringly obvious factor is another question.

Meanwhile for the impact investor, the market in its current form is clearly off-putting and indeed inadvisable – only becoming attractive when there is sustainability, transparency and strategies that comprehensively adopt a holistic approach, incorporating all societal needs.  Some suggestions of how this can be achieved include: the widespread incorporation of tried-and-tested construction models and methodologies that bring uncompromised quality / environmental standards; value / income-led investment models; better established relationships between all stakeholders; clear regulatory measures that avoid abuse by both the developers and the end buyer (anti-black market trading, for example) and mechanisms that protect against corruption across the board.

There are also some very positive dynamic s related to the growth of the BoP housing sector that should be noted – demand is incredibly high meaning that the sales risk that often comes with targeting wealthier demographics is effectively eliminated (in Brazil, for example, all local prefectures have massive waiting lists of affordable housing buyers amongst other developer guarantees).  Another plus relates to the growing emergence government incentives for the private sector being offered which, although questionably formulated at present, should sophisticate over time.

The sector is clearly at a tipping point and the patterns emerging in less developed housing markets have shown that ignorance over the rapidly swelling deficits will only exacerbate the issues down the line.  The BoP is now demanding real housing solutions and impact investors – providing they incisively focus on the right opportunities whilst avoiding the archaic strategies presently commonplace – have immense potential gains to make.  Indeed, it was with some surprise to see the current comparatively low impact investment fund expectations in relation to the high return business model of the Fez Tá Pronto Construction System© (just over 1x applied capital was recently stated as Acumen Fund’s current return goal and IGNIA’s Michael Chu alluded that the organisation’s objective is also to receive at the return of capital invested as a minimum).

Download the full fez ta pronto 2012 PDF report and ask any of your questions to Ruban Selvanayagam on the global affordable housing project by clicking here

Despite not being immune to the effects of the Euro Zone crisis due to well established trading relationships, Turkey’s firm positioning as an emerging nation is backed by a number of solid fundamentals – with notable growth sectors including banking, transport, steel, shipbuilding and communication.  The country has also increasingly removed itself from the shackles of political instability and military coups to become a highly reputable investment destination with FDI peaking before the global downturn in 2007 at $ 19.1 billion before dropping to $US 6.3 billion in 2010.

Yet, as with much of the emerging world, the popular adage of a “rising middle class” remains blurred by definition when examining housing conditions of the notable proportion of the population who remain at the bottom of the pyramid.  According 2007 research by Gamze Ozer – city and regional planner at the Turkish Ministry of Public Works and Settlement – it is estimated that half of the country’s districts with populations of over 70,000 have areas formed of degraded and informally constructed habitation which do not have any form of legal status (known as gecekondus – literally translated as “housing built overnight”) – totalling approximately 2 million in the country’s largest metropolitan regions of İstanbul, Ankara and İzmir alone.  Current minister of environment and urban planning of Turkey Erdoğan Bayraktar has previously indicated that the issue of gecekondus is the country’s third largest problem after terrorism and foreign debt.  Yet attempts to resolve the issue are practically non-existent and a familiar story of private developers ignoring the needs of the base of the pyramid is readily apparent (fuelled by a lack of genuine government encouragement).

In response to the rapid levels of urbanisation which commenced in the 1950s, the Turkish government´s urban development plans involved the extensive reformation of the traditional regions subsequently resulting in the growing implementation of plans to initiate borderline involuntary evictions – i.e. residents were often given a “say” in the matter and petitions were formed, yet commercial interests inevitably dominated the decision making process with negligible compensation packages offered.

Whilst the Gecekondu Act of 1966 looked to recognise their existence and also prevent their growth, the restrictions imposed led to the formation of a black market where existing owners of properties leased their units for illegitimate rental income.  Furthermore, due to the massive rise in base of the pyramid urbanisation levels in the latter half of the last century and a lack of associated control mechanisms, the 1980s saw the informal sector recognised as part of the country’s housing stock (albeit informally), mainly due to a distinct lack of other housing solutions as well as a token gesture for political gain.

Today, the rising investment interest in Turkish cities is rarely focused on social infrastructure such as housing and no real strategy exists with regards to replacing gecekondus with more secure conditions. Yet combined with housing legislation and initiatives – such as the State Housing Bank (Emlak Bankasi) and the Workers Social Security Fund (SSK) – which have failed to implement inherent policy and procedures that cater to real social housing needs, mistrust has also grown.  An unspoken business culture of authorities effectively working in line with the desires of the private sector under ineffective modernist development legislation effectively continues to undermine any disagreement by residents.  Gecekondu areas are purchased informally for control to be taken and subsequently developed into middle and above classed housing.  Whilst compensation is offered as a result of the forced sales, valuations are ambiguously calculated with the capital received being significantly below what is necessary to be able to remain in a strongly inflated land and property market.

To exacerbate the issue, reports of political bribery of gecekondu residents in order for them to abstain in engaging in activism has also been witnessed – merely fuelling what are already noticeable wealth divides.  Wikileaks also reported that party members have been known to distribute big ticket household items in exchange for votes.  Those that do speak out invariably fall victim to their own search for justice – according to Andrew Gardner, Turkey researcher for Amnesty International speaking to the Christian Science Monitor in 2011 on the issue of evictions: “the fact that people [who] the state doesn’t like are getting their rights violated isn’t a coincidence.”

In 2000, the Turkey Mass Housing Authority (TOKi) programme was launched as an attempt to phase in the replacement of gecekondu housing with “modern apartments” based on a construction framework of mixed luxury and low income units.  Nevertheless, the limited numbers of ex-gecekondu residents that have moved into such units have reported that financial sustainability is difficult due to having to borrow privately to afford the minimum ten percent down payment plus the additional monthly premiums to cover the difference between the low value of their previous gecekondu residences and that of the new accommodation.  As a result, many of units end up being sold in anticipation of potential losses and families move back to gecekondu areas.

Download the full fez ta pronto 2012 PDF report and ask any of your questions to Ruban Selvanayagam on the global affordable housing project by clicking here

An article I wrote below for Alliance philanthropy and social investment magazine

Back in November 2010, the JP Morgan-produced report on impact investment was widely viewed as a refreshing mainstream examination of the growing potential of an asset class that works in line with the essential principles of philanthropy (such as social and environmental good) whilst also bringing the added benefit of healthy returns on capital applied.

Perhaps unsurprisingly, considering the ever-rising global shortage, housing the base of the pyramid (BOP) was viewed by the report as being of notable importance – with a potential investment capital requirement of between US$214 and US$786 billion, which offers an anticipated profit capacity estimated at between US$77 and US$648 billion up to the year 2020.

Yet the apparent attractiveness offered via global affordable housing investment activity in relatively untouched markets remains tainted by a number of broad based risks – highlighted here.

Speculation, inflation and exchange rate risks

In the developing world, where real estate markets are hugely informal, uncontrollably evolving and often entrapped in short boom-bust cycles, it is often a difficult task to firmly establish clear-cut investment parameters and cohesive business development plans. As a result (and also taking into account artificial price pressures, value-based ambiguities on core construction inputs (particularly land) and volatile currency fluctuations) it remains the case that a significant majority of BOP housing models are simply not safe enough.

Inefficient construction models and management systems

A lack of real estate market sophistication within the developing world often means that international building standards are rarely respected. In the affordable sector, project planning is often undertaken haphazardly based on underestimated costs as well as a lack of effective and future-proofed construction development procedures. Once the development is underway, one of the issues that predominantly arises is the management of staff – India’s construction workforce, for example, are often subject to working conditions that are arguably akin to slave labour, which, in turn, compromises the moral aspects of an investor’s involvement in such projects.

Real estate development corruption and a lack of transparency

In what are often heavily bureaucratic planning systems operating in line with complicated tax laws, a significant proportion of housing projects are formed in an environment where developers invariably need to be in the pockets of the relevant government organs to make any headway. Consequently, despite the massive demand (and necessity), projects that cater to the low-income groups are largely perceived as a secondary priority due to a desire to make projects financially ‘worthwhile’ for all the parties involved. From a wider perspective, applying funds in politically instable countries and regions with the specific objective of achieving a return is likely to involve offputting transactional complexities, as well as what are often implicit barriers to FDI.

Moving forward…

The apparent negativity expressed above is of course no excuse for indifference, particularly considering the major implications that the continued rapid growth of slum presence will have on global security, the environment, health and a myriad of other socioeconomic factors.

What remains clear is that global philanthropic efforts related to dealing with the unprecedentedly global housing deficit (rising by approximately 44 million annually, according to UN statistics) are not enough – a problem that has been exacerbated by the effects of the global economic crisis. It is therefore undoubtedly necessary for the sector to unite and move beyond half-baked ideologies which, in turn, become ubiquitously defined as the ‘only solutions’ to improve the situation.

Download the full fez ta pronto 2011 PDF report and ask any of your questions to Ruban Selvanayagam on the global affordable housing project by clicking here

Chile’s average Gini coefficient rate of 0.50 places it as having the highest income inequality level in comparison to its OECD peers (noticeably higher than the group´s average rate of 0.31), demonstrating that even a nation deemed to be a Latin American leading economic force is not without its core issues related to poverty.  Nevertheless, looking at housing policy, while the targets of completely eliminating slum accommodation in 2010 were not achieved, Chile´s reforms have made some marked and exemplary steps in the right direction.  In 1997, the Roof for Chile Foundation (Un Techo para Chile, UTPCH) estimated that there were 126,000 families living in permanent slums which subsequently dropped to 28,500 in 2008 and to under 20,000 today.

It is clear that the slums (barrios bajos) are not as visible as other part of Latin America but, amongst what does exist, UTPCH research shows that almost 50% of informal residents in Chile are living on land owned by the state and 73% of slums are located in urban zones.  The social problems that occur in such areas are a familiar story to much of the emerging world including a lack of essential facilities / infrastructure – leading to disease, drugs, violence as well as a lack of adequate home protection measures to counteract effects of the cold winters.

Despite being what was commonly viewed as clear lack of definitive action by the previous three governments (under Eduardo Frei Ruiz-Tagle, Ricardo Lagos Escobar and Michelle Bachelet Jeria respectively) – a common consensus has emerged that the situation is improving under the 2010 elected president Sebastián Piñera.  However, in order to confirm its reputation as a country leading the way forward for Latin American housing reform, Chile will have to develop viable strategies that effectively deal with the fact that 30,000 families are still living in camps – 235 percent more than the 8,500 that were residing in such circumstances under the previous government as a result of the 8.8 Richter scaled 2010 earthquake.

In 2012 the government has stated its commitment to the funding of 19,000 million Chilean pesos towards housing subsidies (growing from 6,000 million Chilean pesos in 2011) which – according to housing Minister Rodrigo Pérez – will “be in line with the target we have for the next three years of 18,000 subsidies for families in the camps.”  It was also confirmed that 19 percent of such funding is already in progress beyond the initial stages of design and planning and that, by 2020, there will be no camps or slums of any sort across the country.  Executive director of Roof for Chile Javier Zulueta recently commented that the actions should be viewed positively but, in his opinion, need to be be applied with more force: “the development strategy must urgently overcome the issue of the camps – with the most relevant mechanisms being to speed up processes, change how projects are managed and maintain the emphasis in forming cohesive groups of households within project plans.”  Zululeta believes that it is a moral and entirely achievable obligation on the part of the Chilean government to completely eliminate the camps by 2014.  Other parts of the reforms are focused on providing land rights to regions which are inhabited illegally (including urbanisation plans related to electricity and sewage disposal networks).

In addition there are families who previously received housing from government but decided to not move into or remain due to a lack of adequate facilities that served their basic needs (a common issue with periphery housing catered for the base of the pyramid). Research by Brain et al in 2006 demonstrated that in the capital Santiago, social housing projects are a cause for segregation in the city meaning that such regions become of little appeal: amongst a sample of 425 social housing units, results show that 70% were located 10km or further to the downtown area, while only 2% of the sample was located within 5km.  However, with the noticeable reforms that have occurred over the last decade, evidence has shown that initiatives such as the voucher housing programme have enabled the lower income demographic to locate themselves closer to downtown metropolitan areas.  It was also recently announced that some 67,000 million Chilean pesos will be invested in urban development infrastructure including streets, traffic alleviation, public spaces and parks.

Never a simple task but, whilst there is an ample amount of work remaining, progress being made on eliminating core housing issues in Chile is seemingly further advanced than the case in much of the rest of Latin America.  Yet questions do need to be made with regards to the impact of the subsidies being provided as well as the longevity of their effects.  It will also need to be ensured that housing subsidy provision is not abused and managed inefficiently and checks are implemented to monitor that money is not wasted via inefficient construction practices, methodologies, corruption and bureaucracy.  Furthermore, as Chile’s economy continues to see broadly positive signs of economic growth, the effects of inflationary pressures on the construction industry need to be observed closely to so that price brackets do not move beyond affordability levels.

Download the full fez ta pronto 2011 PDF report and ask any of your questions to Ruban Selvanayagam on the global affordable housing project by clicking here

Due to being increasingly recognised as an international investment destination of interest as well as having a metropolitan deficit estimated at 1.3 million units, we recently undertook some outline research on base of the pyramid real estate in Colombia´s capital, Bogotá.   The focus of the data collection was to examine if there was real viability for low income earning Bogotá citizens to truly able to access a decent level of housing in the current marketplace where wealth divides remain high.

The first table below demonstrates a breakdown of 30 development projects advertised on the Estrana Vivienda and Viva Real property portals at prices between 34,000,000 and 50,850,000 Colombian pesos.  This price bracket was based on inputting an affordably feasible level of secured credit into the Credit Familia housing finance simulator – a growing lender that, according to its mission statement, is aimed at developing “high quality financial services targeted to low and middle income segments” (at a loan to value ratio of 70 percent).  In terms of affordability, the table beneath represents how our analysis was undertaken on the basis of examining the wages of some typical employment positions that those at the base of the pyramid would be engaged in (using the Tu Salario site as well as the Empleo and Jooble jobs portals).  We outline basic salary receipts and our definition of a household is as two adults working full-time (approximately 35 hours per week excluding bonuses, overtime, weekends etc.).

Based, therefore, on an assumptive earnings level of 1,212,785 pesos per month – the following can be deduced using the Credit Familia mortgage simulator (we have highlighted the various payment options):

(i)  At a minimum sales unit price of 34,000,000 pesos – a house buyer would have access to 23,800,000 of secured credit payable over 15 years.  Should an option to the repay the loan under Real Unit Value credit (Unidad de Valor Real, UVR) with an interest rate of 9.75 percent be adopted, using the fixed fee payment mode (modalidad de pago con cuota fija) produces an initial monthly payment of 246,935 pesos, halfway through the term the payment would be 318,706 and the final installment would be 412,517 – averaging a mortgage installment of 326,053 pesos per month.  Using the option to pay under the constant capital guarantee mode (modalidad de pago con abono constante a capital) (under UVR), the first monthly payment would be 318,370 pesos, halfway would be 292,355 pesos and the last would be 223,242 – averaging over the term at 277,989 pesos per month.  Should the mortgage finance for this unit chose to be paid in pesos at an interest rate of 14 percent (not inflation indexed), using the fixed fee payment mode (modalidad de pago con cuota fija) payments across the term would be at 303,867 pesos – with the constant capital guarantee mode (modalidad de pago con abono constante a capital), the first monthly payment would be 393,519 pesos, halfway would be 264,322 pesos and the last would be 133,674 pesos – averaging over the term at 263,838 pesos per month.  At this minimum price, the average of the 4 payment options arrives at 292,937 pesos (24.2 percent of a monthly salary of 1,212,785 pesos) making units at close to this open market value bracket comfortably within the realms of affordability for the base of the pyramid working household in Bogotá.  However, it should be noted that the size of this particular unit is comparatively small;

(ii)  At a medium sales price of the 30 units analysed at 41,989,652 pesos – a house buyer would have access to 29,392,756 of secured credit payable over 15 years.  Should an option to the repay the loan under Real Unit Value Credit (Unidad de Valor Real, UVR) with an interest rate of 9.75 percent be adopted, using the fixed fee payment mode (modalidad de pago con cuota fija) produces an initial monthly payment of 304,962 pesos, halfway through the term the payment would be 393,598 and the final installment would be 509,455 pesos – averaging a mortgage installment of 402,672 pesos per month.  Using the option to pay under the constant capital guarantee mode (modalidad de pago con abono constante a capital) (under UVR), the first monthly payment would be 393,184 pesos, halfway would be 361,055 pesos and the last would be 275,702 pesos – averaging over the term at 343,314 pesos per month.  Should the mortgage finance for this unit chose to be paid in pesos at an interest rate of 14 percent (not inflation indexed), using the fixed fee payment mode (modalidad de pago con cuota fija) payments across the term would be at 375,273 pesos – with the constant capital guarantee mode (modalidad de pago con abono constante a capital), the first monthly payment would be 485,992 pesos, the mid-term payment would be 326,435 pesos and the last would be 165,086 pesos – averaging at 325,838 pesos per month. The average of the four payment options using this average price level calculates as 361,774 pesos (29.8 percent of a monthly salary of 1,212,785 pesos) making a good share of the units on the list affordable under the above wage assumptions;

(iii)  At a maximum sales unit price of 50,850,000 pesos – a house buyer would have access to 35,595,000 of secured credit payable over 15 years.  Should an option to the repay the loan under Real Unit Value Credit (Unidad de Valor Real, UVR) with an interest rate of 9.75 percent be adopted, using the fixed fee payment mode (modalidad de pago con cuota fija) produces an initial monthly payment of 369,313 pesos, halfway through the term the payment would be 476,652 and the final installment would be 616,956 pesos – averaging a mortgage installment of 487,640 pesos per month.  Using the option to pay under the constant capital guarantee mode (modalidad de pago con abono constante a capital) (under UVR), the first monthly payment would be 476,150 pesos, halfway would be 437,242 pesos and the last would be 333,879 pesos – averaging over the term at 415,757 pesos per month.  Should the mortgage finance for this unit chose to be paid in pesos at an interest rate of 14 percent (not inflation indexed), using the fixed fee payment mode (modalidad de pago con cuota fija) payments across the term would be at 454,461 pesos – with the constant capital guarantee mode (modalidad de pago con abono constante a capital), the first monthly payment would be 588,542 pesos, the mid-term payment would be 395,317 pesos and the last would be 199,921 pesos – averaging at 394,593 pesos per month. Whilst all but the last payment option being slightly over a third of the monthly household wage estimation assumed, the installments are not particularly far off being at an affordable level for the base of the pyramid Bogotá citizen (the average of all four payments forms results as 438,113 pesos which works out as 36.1 percent of an average income of 1,212,785 pesos per month).  However, it should be noted that there are other associated costs that need to be considered when purchasing a home such as insurance, community taxes, fixtures and fittings (most units are sold very basically) which may well push the units out of financial reach.

On the face of things, despite what are comparatively high interest rates, the majority of the base of the pyramid stock analysed in Bogotá fits into generally accepted definitions of housing affordability (ie. housing expenses forming a third of monthly household income).  However, this will also be dependent on buyers adherence to the necessary credit approval requirements and their ability to access the 30 percent deposit (although this may be assisted by the national Family Housing Subsidy, see below).  Questions would also need to be asked about the quality of the construction methodologies adopted.

Furthermore, as the map above demonstrates, the actual location of the majority of the developments brings important implications.  Whilst there are two developments located in the low-middle class region of Kennedy, the majority are found within the vicinities of Usme and Soacha.  Both of these latter areas are located in what is recognised as the urban poverty belt – currently housing huge slum populations, the majority of who would not be earning over the national minimum wage of 535,600 pesos per month.  Indeed, it is likely that real incomes are likely to be significantly lower considering Colombia has one of the highest displaced populations on the planet (3.4 million national citizens were such a position in 2010 according to the UNHCR) – the majority of who are earning less than 2 dollars a day and invariably reside in such regions.  Both regions have very poor urban infrastructure in place; Soacha itself is known to have one of the worst slum problems in the country and parts of Usme were officially classified as high risk  in 2011 due to  being hit by landslides earlier in the year (according to a report by El Tiempo newspaper, over 40,000 people in Bogotá live in such circumstances).

These regions, however, certainly should not be dismissed and need to form part of a wider strategy of removing Bogotá slums.  It is indeed encouraging that a certain level of financial viability can be seen; peripheral areas like Soacha and Usme have been chosen as a result of a common stumbling block for base of the pyramid developers to be able to build at a price in line with real salaries of the demographic and, to a certain extent, their business models are sound.  Yet, developing in areas like these will only make sense if there is a concerted effort to primarily improve infrastructure, raise standards of living and provide accessible base of the pyramid employment opportunities for those who are residing in the slums which, theoretically, should enable them to have better accessibility to such housing.

From a broader perspective, considering the poor state of stock across the country, there is a vital need for the Colombian government to take a more hands on role in improving housing standards, particularly taking into account the growing success of the economy.  Whilst initiatives such as Family Housing Subsidy (Subsidio Familiar de Vivienda, SFV) are to be welcomed, the programme itself has been bought into question with regards to the need to foster stronger actions for its optimum implementation considering the scale of the national deficit and slum problem.  It has also been reported that many people who have been able to access the grant have not been able to access complementary credit – in 2011, just 46,000 of such subsidies have been granted.  Other risks that need to be considered are the increasing inflationary pressures that have hit the construction input sector in recent times as well as the bureaucracy and corruption that much of Latin America is well recognised as having.

Download the full fez ta pronto 2011 PDF report and ask any of your questions to Ruban Selvanayagam on the global affordable housing project by clicking here

As the agenda of base of pyramid housing growth becomes an increasingly crucial component of global sustainability, the sheer size of the segment often prompts an assumption that quality needs to be compromised to truly be able to meet the huge and ever-rising demands.

Indirectly – although rarely openly admitted – the term ´affordable´ often comes with the connotations (and realities) of housing utilising lower quality materials, adopting bare-bones construction procedures and being located on non-prime land in order for sales price to adhere to the realistic low income levels of end buyers.  The current market facts will justify such reasoning: in a global economic environment where inflation is eating away at the margins of even the most scaled and consolidated construction companies, a situation has arrived where catering for the majority BoP populations is a practically impossible business model.  With the only coping strategy being to cater to the mid-upper income groups, real housing needs continue to be severely unmet due to this lack of perceived viability.  Of course, ignoring the issue will simply not do – particularly as the needs for BoP housing look set to double within the next 20 years.  But how to deal with this conundrum and move away from what seems to be a widespread industry consensus that incremental slum improvements and very basic housing are the only solutions?

Ask any developer in the world today if it would be possible to apply their luxury construction business models to the base of the pyramid housing sector and the answer would like to be an unequivocal no.  However, our associated BoP low income housing development company – Fez Tá Pronto – has the proven capability to completely change this paradigm and achieve this seemingly impossible goal.

The programme has been developed over the last 7 years focusing on the Brazilian low income housing market which – despite false government proclamations of improvement – has one of the highest deficits in Latin America and the emerging world.  Fez Tá Pronto essentially adopts a copyrighted and semi-industrialised methodology using a patented gypsum plaster block that enables costs to be reduced by a minimum of 40 percent.  It is these savings that enables us to bring our sales prices in line with genuine wage levels of the base of the pyramid whilst still adopting the very highest of technical and quality standards as well as bringing the ability to build in regions which are well located to BoP livelihoods.

When we sent our business proposals to David Smith CEO of the Affordable Housing Institute in January 2011, he kindly appraised the programme with the following comment: “Low-cost, low-tech and low-skill building-technology materials and processes are key elements in housing affordability in informal communities and rapidly expanding cities. With its innovative combination of local materials and traditional construction methods, the Fez Tá Pronto building system has an unusual potential to address significant and longstanding local housing needs in an environmentally sustainable way.”

Download the full fez ta pronto 2011 PDF report and ask any of your questions to Ruban Selvanayagam on the global affordable housing project by clicking here